NEW YORK ( TheStreet ) -- Gold prices battled their way higher Tuesday as bargain-hunters stepped in to take advantage of lower prices.

Gold for February delivery closed up $20.90 at $1,617.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,620.80 and as low as $1,594.10 an ounce while the spot price was up $21, according to Kitco's gold index.

Silver prices added 66 cents at $29.53 an ounce while the U.S. dollar index was shedding 0.59% at $79.86.

"We are seeing a Santa Claus rally in precious metals," says George Gero, senior vice president at RBC Capital Markets. "We are now back to that 200-day moving average number that was breached last week and a close there or above may signal a good technical rebound."

Gold gained traction early Tuesday after Spain raised more than €5 billion in its latest debt auction and saw strong demand and lower borrowing costs. The news lifted the euro, weakened the dollar and helped gold prices. Greece also raised more than €1 billion for three months at relatively stable borrowing costs.

Investors looking to buy gold at cheaper prices also stepped in to take advantage of gold's 7% decline last week.

"Good physical demand for gold has again been seen overnight," said James Moore, research analyst at, "and will provide background support."

Phil Streible, senior commodities broker at RJO Futures, still believes gold can hit $2,000 an ounce in 2012.

"People are going to look at 2012 for a new asset allocation strategy" and that gold might be appealing considering its "attractive levels," he said.

"From a fundamental point of view nothing has really changed," said Nick Barisheff, president of precious metals investment company Bullion Management Group. "They haven't solved the problem in Europe ... the U.S. debt situation is the same and growing as it has always been ... the fundamental drivers of gold are all still there."

Barisheff argued that since gold is a thinner market than other asset classes, big swings like last week's correction are more dramatic.

"I think it's getting close to being over at this point, but really it will be only in January that things will start getting back to normal," Barisheff said.

Gold should continue to trade inversely to the U.S. dollar as traders flock to the paper currency in times of real panic and as bad headlines erupt out of Europe. On the flip side, on day's like Tuesday when the U.S. dollar takes a break, it leaves the door open for gold to rally.

Gold mining stocks were climbing Tuesday. Kinross Gold ( KGC - Get Report) was rallying almost 2.84% at $11.93 while Yamana Gold ( AUY - Get Report) was adding 4.49% at $14.66.

Other gold stocks, Agnico-Eagle ( AEM - Get Report) and Eldorado Gold ( EGO - Get Report) were jumping at $37.58 and $13.35, respectively.

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-- Written by Alix Steel in New York.

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